The Nazis Planned to Bomb Britain With Forged Bank Notes | smithsonianmag.com | Smithsonian The Nazis Planned to Bomb Britain With Forged Bank Notes But Operation Bernhard never made it rain This could have been Britain during World War II, but Operation Bernhard was foiled after the Allies learned about the plan. (Andrew Brookes/Corbis) smithsonian.com March 1, 2016 The Second World War may have been the bloodiest war, but it also could be considered the weirdest—a conflict full of foiled plans to do everything from kidnap the pope and lock him up in a castle to strap miniature bombs on bats and drop them on Japanese cities. Add one to the “strange, but true list”: as Richard Dunley blogs for Britain’s National Archives , the Nazis planned to bomb Britain with clouds of forged bank notes. Of course, the idea wasn’t intended to "make it rain" for English citizens—rather, writes Dunley, it was designed to destabilize the British economy. But the plot was uncovered when Alfred Naujocks, a German intelligence officer, was captured and interrogated in 1944, Dunley writes.

Naujocks was already infamous before his capture: Five years earlier, he had organized and carried out the so-called Gleiwitz incident, seizing a Polish radio station and transmitting an anti-German speech. Along with other supposedly anti-German events orchestrated by the Germans themselves, the incident gave Germany an excuse to invade Poland and World War II was set into motion. Nanjucks told his interrogators that he was in charge of spearheading a campaign called Operation Bernhard designed to undermine the British economy. Naujocks and other Nazis used 140 Jewish prisoners at Sachsenhausen concentration camp, who they trained to forge British bank notes. They even contracted with a special factory to provide the proper paper for British notes. But CIA historian Kevin Ruffner writes that wartime shortages meant that only about 10 percent of the 134 million British pounds produced by the forgers was good enough to be circulated. This forged British note was made by prisoners at Sachsenhausen concentration camp in Germany during World War II. (Wikimedia Commons) “The instructions came from Hitler himself, who wanted to drop huge quantities of forged bank notes from German aircraft[s],” writes Dunley.

Hitler apparently hoped that the scheme would dangerously inflate the British wartime economy and weaken Great Britain, making it an easier target for a German invasion. The Nazis also planned to counterfeit American dollars with the hopes of doing the same across the Atlantic to the United States. Of course, that plot never became real. Though Germany did use some of the forged money to import supplies, Naujocks and his team had to move their top secret forgery center from camp to camp during the rest of the war. Finally, at the end of the war, desperate Nazis burned huge amounts of British “currency” and dumped some of it in a remote Austrian lake. Years later, some of the money was found at the bottom of Lake Toplitz and was incinerated by British authorities . The forged money may not have done its job, but England didn’t take any chances. After the war, the Bank of England withdrew all notes with a value of more than five pounds as soon as it had designed and printed new paper money. For a scheme that didn’t work, Operation Bernhard sure affected plenty of people—and will go down in history as one of wartime’s most over-the-top secret plots. Like this article?

Rare British banknote sells for 25,000 at auction Rare British banknote sells for 25,000 at auction 1935 Bank of England £1,000 note sells for £25,000 in Dix Noonan Webb auction Notes were withdrawn from circulation during World War II By A Only about two dozen 1935 £1,000 notes are thought to still survive after they were withdrawn due to a Nazi plot during World War II. This example was sold at auction Sept. 29 by Dix Noonan Webb in London. Image courtesy of Dix Noonan Webb. A Bank of England £1,000 note sold for £25,000 ($40,616) in the Sept. 29 Dix Noonan Webb auction. The note, dated Oct. 15, 1935, had been expected to realize £18,000 to £22,000 ($30,700 to $37,600 in U.S. funds), according to the auction firm.

The notes were withdrawn from circulation during World War II because of a Nazi plot to flood Britain with forged paper currency. Only about two dozen of the original, genuine £1,000 notes survive. The £1,000 note was the highest denomination ever issued by the Bank of England. Its demise was prompted by Operation Bernhard, the German plan to destabilize the British economy by flooding the country with counterfeit notes during World War II. The original plan was to parachute the counterfeit money into Britain, but it was found more practical to use the notes to pay German agents operating throughout Europe. The Bank of England reacted by withdrawing all notes in denominations of more than £5. The £1,000 note was last issued in 1943 and ceased to be legal tender April 16, 1945. When the £1,000 notes were withdrawn from circulation and destroyed, just 63 remained unaccounted for, and today about two dozen are thought to exist. The example auctioned at Dix Noonan Webb was consigned by a British private collector. In addition, a rare £10 million Bank of England Treasury bill in the same auction sold for £17,000.

It was the first time that a Treasury bill with such a huge face value had come onto the collector market, according to the auction firm. The Treasury bill, which promises to pay the bearer £10 million, but is stamped “CANCELLED,” was estimated to bring up to £15,000 ($24,200) in the sale, according to the firm. The last bills were produced in September 2003, including the one auctioned, which was given to a leaving government official as a retirement present after the bill was stamped “CANCELLED,” according to the firm. For more information about the auction, visit the firm’s website or email the firm.

More from CoinWorld.com: Operation Bernhard | History of Sorts History of Sorts WORLD WAR 2 ,EIGHTIES,MUSIC,FANTASY,ZOMBIES,Hacksaw Ridge,Genocide,Irish WWII Heroes Post navigation by dirkdeklein under Auschwitz , Counterfeit , History , Nazi Gold , Sachsenhausen , World War 2 This story had all the makings of a great spy movie and no wonder that in 2007 ,film director Stefan Ruzowitzky made the movie “The Counterfeiters” which won the Oscar for best movie in a foreign Language. Operation Bernhard was the name of a secret German plan devised during World War II to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes, which was named after the SS officer who ran it. Only a fortnight after the start of World War II, at a meeting that has remained a secret for more than half a century, officials of German finance and Nazi espionage approved an audacious plot to bring down the world’s financial system. Hundreds of millions of forged British pounds were to become a weapon of war.

Operation Bernhard not only became the greatest counterfeit scheme in history but the most wide-ranging and bizarre, with its own gallery of rogues. It was the code-name of a secret Nazi plan devised by the RSHA (Reich Main Security Office) and the SS to destabilize the British economy via economic warfare by flooding the global economy and the British Empire with forged Bank of England £5, £10, £20, and £50 notes. It was the largest counterfeiting operation in the history of economic warfare, and the first that employed the full technical/scientific and management expertise of a sovereign state to produce and deploy bogus currency with the aim of destabilizing an enemy belligerent’s economic standing with its allies, as well as its acceptance by neutral powers. Britain was especially vulnerable because its war effort was founded upon – and sustained by – its global and Imperial economy. That economy was built upon directly-ruled colonial possessions, self-governing Commonwealth Dominions and the Empire’s currency zone, the Sterling Preference Area. These worked in commerce with neutral powers to acquire the manpower and material necessary to fight a global war.

Each of these trading partners accepted the British currency for the exchange of goods and services and maintained their own reserves of it for transactions with, and within the Empire. Confidence in the integrity of this (then global) currency, both in and outside of the Sterling Preference Area, was essential to sustaining the vitality of the Empire, and through it, the war effort. Major Bernhard Krueger, a meticulously correct SS engineer, ran a production line of Jewish prisoners in Sachsenhausen concentration camp near Berlin. The millions of forged notes they printed were laundered through a Nazi confidence man with the help of Jewish agents who concealed their origins. Toward the end, one of Europe ‘s most accomplished professional forgers, the only career criminal in the operation, was brought in to counterfeit dollar bills. In London, the arrogant grandees at the Bank of England could not believe their pound notes could be forged with such expertise and in such quantity. In one of the crowning ironies of many, after the war Golda Meir protected a millionaire Jewish money-launderer from British authorities in what was then known as Palestine.

The plan was to destabilize the British economy during the war by dropping the notes from aircrafts, on the assumption that most Britons would collect the money and spend it, thus triggering inflation. This scheme was not put into effect: it was postulated that the Luftwaffe did not have enough aircraft to deliver the forgeries, and by that time the operation was in the hands of SS foreign intelligence. From late 1943, approximately one million notes per month were printed. Many were transferred from SS headquarters to a former hotel near Meran in South Tyrol, Northern Italy, from where they were laundered and used to pay for strategic imports and German secret agents operating in Allied countries. It has been rumoured that counterfeit currency was used to finance the rescue of Benito Mussolini in 1943. The plot was hatched in Berlin on September 18, 1939, behind the imposing stone facade of what had once been Kaiser Wilhelm’s Finance Ministry. Walther Funk, a pudgy former financial journalist whose principal task was keeping German industry in Hitler’s camp, was the only one to register the least objection because he feared the counterfeit notes would upset his task of milking Hitler’s conquered territories.

Josef Goebbels, Hitler’s propaganda minister, was not present but feared the “grotesque plan” might be turned against Germany ‘s own fragile finances by the Allies. In fact, Winston Churchill and Franklin D. Roosevelt toyed with the idea of counterfeiting enemy currency but their advisers rejected it. Nevertheless, the second-rate minds of Nazi espionage believed they could weaken the pound as the trading standard and store of value underpinning the British Empire. Bullies and incompetents were at first put in charge of the operation. After several false starts, Krueger, a textile engineer, figured out how to match the paper, printing, and design of the impressive British notes. He found his forgers in Jewish death camps on the orders of SS Reichsführer Heinrich Himmler. Krüger set up a team of 142 counterfeiters from among inmates at Sachsenhausen concentration camp at first, and then from others, especially Auschwitz.

Beginning in 1942, the work of engraving the complex printing plates, developing the appropriate rag-based paper with the correct watermarks, and breaking the code to generate valid serial numbers was extremely difficult, but by the time Sachsenhausen was evacuated in April 1945, the printing press there had produced 8,965,080 banknotes with a total value of £134,610,810. The notes are considered among the most perfect counterfeits ever produced, being extremely difficult although not impossible to distinguish from the real thing Some were plucked from Auschwitz by Krueger himself, who courteously addressed them with the formal German Sie. The SS planned to keep the operation secret by killing them when the job was done. The prisoners worked with the knowledge that they were marked for death when they had finished their jobs. ” From the start, they wondered whether they should stretch out their work and risk execution for sabotage, or perform efficiently and thus hasten their own deaths. No one ever knew for sure where Krueger stood, but by keeping the operation going, he kept himself from being sent to the Russian front.

What all these men said and thought as they lived under this sword of Damocles makes chilling, personal drama. The pound counterfeiting operation ended in 1944. Not wanting to go to the Eastern Front, and mindful of the fate of the concentration camp prisoners in his employ if his factory were closed, Krüger succeeded in establishing a new operation to forge American dollar notes. Instructing his workers to work as slowly as possible, he managed to stall the operation until the war ended, permitting the prisoners to be liberated after they were transferred to camps in Austria in May 1945. One of the forgers, Adolf Burger survived the war and stated that “Major Krüger was in no way like Oskar Schindler. He was a murderer just like everyone else, six weeks before the war ended he had six people shot just because they were sick. He couldn’t send them to hospital in case they said something about the operation, so he killed them.” After the war, Major Krüger was detained by the British for two years, then turned over to the French for a year. He said they asked him to forge documents but that he refused.

He was released in 1948 without any charges being pressed, and returned to Germany. In the 1950s, he went before a denazification court, where inmates under his charge at Sachsenhausen provided statements that resulted in his acquittal. He eventually worked for the company that had produced the special paper for the Operation Bernhard forgeries. He died in 1989. Following the evacuation of Sachsenhausen, the counterfeiting team was transferred to Redl-Zipf in Austria, a subsidiary camp of the Mauthausen-Gusen concentration camp. At the beginning of May 1945, the team was ordered to transfer again, this time to the Ebensee subsidiary camp where they were to be killed together. Their SS guards, however, had only one truck for their prisoners, so the transfer required three round trips. The truck broke down during the third trip, and the last batch of prisoners had to be marched to Ebensee where they arrived on May 4. The guards of the first two batches of prisoners fled when the prisoners at the Ebensee camp revolted and refused to be moved into tunnels where they would have probably been blown up.

The counterfeiters then dispersed among the prisoners at Ebensee. The delayed arrival of the third batch therefore saved the lives of all. As a result of the order that all the counterfeiters be exterminated together, none were actually killed. The Ebensee camp was liberated by US forces on May 6, 1945. One of the prisoners, the Jewish Slovak printer-turned-counterfeiter Adolf Burger, later contributed to the awareness of Operation Bernhard with several versions of his memoirs published in the languages of Central Europe and in Persian. It is believed that most of the notes produced ended up at the bottom of Lake Toplitz near Ebensee from where they were recovered by divers in 1959, but examples continued to turn up in circulation in Britain for many years, which caused the Bank of England to withdraw all notes larger than £5 from circulation, and not reintroduce the denominations until the early 1960s (£10), 1970 (£20), and 1980 (£50). It is also rumoured there is quite a substantial amount of Nazi gold in the depth of Lake Toplitz.

A few years ago an Austrian farmer and one of his family members played a prank on a local town councilor. He claimed that he had found a box full of gold bars which he and his friend had found whilst diving in the lake. He had actually just painted a few bricks gold and had forged a Nazi stamp. The area still sees a lot of tourists and divers who hope that one day they will find the real’mythical gold’ which was dumped in the lake. Rare 1935 Bank of England note in Sept. 29 London auction Rare 1935 Bank of England note in Sept. 29 London auction One of only two dozen 1935 £1,000 Bank of England note in Sept. 29 Dix Noonan Webb auction in London Dix Noonan Webb offers rare 1935 £1,000 Bank of England note By A One of only about two dozen £1,000 notes thought to have survived after they were withdrawn due to a Nazi plot during World War II is offered in a Sept. 29 auction. Image courtesy of Dix Noonan Webb.

Bank of England £1,000 notes were withdrawn from circulation during World War II because of a Nazi plot to flood Britain with forged currency. Only about two dozen survive, and one is to be auctioned by Dix Noonan Webb in London on Sept. 29, 2014. The note, dated Oct. 15, 1935, is expected to fetch £18,000 to £22,000 ($30,700 to $37,600 in U.S. funds), according to the auction firm. When it was printed, the £1,000 note was not something anyone would have carried around in a wallet routinely, which may account for its excellent condition, according to the auction firm. The £1,000 note had significant purchasing power. For example, the average price of a house in the United Kingdom in 1935 was £530, so the note would have been enough to buy one average home and another one slightly further down in the property price scale. The face value of the note was worth more than five times the average annual salary of £192 in the United Kingdom at the time.

The £1,000 note was the highest denomination ever issued by the Bank of England. Its demise was prompted by Operation Bernhard, the German plan to destabilize the British economy by flooding the country with counterfeit notes during World War II. The original plan was to parachute the money into Britain, but it was found more practical to use the notes to pay German agents operating throughout Europe. The Bank of England reacted by withdrawing all notes in denominations of more than £5. The £1,000 note was last issued in 1943 and ceased to be legal tender April 16, 1945. When the £1,000 notes were withdrawn from circulation and destroyed, just 63 remained unaccounted for, and today about two dozen are thought to exist. The example to be auctioned at Dix Noonan Webb was consigned by a British private collector. For more information about the note and the upcoming auction, visit the firm’s website or email the firm.

More recent paper money news: On the Trail of Nazi Counterfeiters - The Daily Beast The Daily Beast History’s Mysteries On the Trail of Nazi Counterfeiters With the recent declassification of hundreds of CIA case files, some strange tales of history have come to light. Dr. Kevin C. Ruffner 09.20.14 10:55 AM ET On Thursday, the CIA declassified hundreds of files from its in-house journal, Studies in Intelligence, after a successful Freedom of Information Act request from a former employee, resulting in a bonanza of fascinating and downright weird tales from the history of the CIA from the 1970s through the 2000s. Among the hundreds of files, available here , we found this intriguing tale of Nazi plans to destabilize the American and British economies in the final days of the Third Reich. In November 2000, CBS television broadcast to the world its efforts to locate hidden Nazi treasures in the deep waters of Like Toplitz in the Totes Gebirge mountains of western Austria.

During the previous summer, Oceaneering Technologies—the same underwater salvage company that discovered the Titanic—had mapped the lake and used a sophisticated one-man submarine to scour its freezing, dark bottom. Only at the end of the search did Oceaneering detect the remnants of wooden crates, which turned out to contain counterfeit British pounds and American dollars. The bills were in excellent condition. The lake—which has no oxygen below 65 feet—“preserves everything” that falls into it, according to a local resident. Although more valuable treasures did not emerge from Lake Toplitz during the expedition in 2000, the discovery of the forged currency reawakened interest in one of the most bizarre intelligence adventures from the climactic end of World War II. Operation Bernhard By 1939, the German Reich had begun to formulate a plan to undermine the economies of the British Empire and the United States through currency destabilization. Known as Operation Bernhard, the plot was launched by SS officers Alfred Naujocks and Bernhard Kruger of the Reichsicherheitshauptamt (the German Security Main Office, or RHSA), who decided to produce bogus currency in addition to false documents, as part of a broad wartime intelligence campaign.

The German counterfeiting scheme ranks among the war’s most interesting clandestine activities and involved the highest officials in the Third Reich. “Had this counterfeiting operation [been] fully organized in 1939 and early 1940,” Holocaust scholar Rabbi Marvin Hier has commented, the “results of World War II may have been quite different.” As it turned out, it took the Germans until 1942 to put Operation Bernhard into high gear. At Sachsenhausen concentration camp near Berlin, SS Sturmbannfuhrer Bernhard Kruger, oversaw the work of 140 Jewish prisoners trained as forgers. Isolated from the main prison area by barbed wire fences, two barracks were set aside for inmates working as printers, binders, photographers, and engravers. The Nazis placed a prisoner as the head of each section under the overall charge of Oskar Stein, an office manager and bookkeeper. In addition to sparing their lives, Kruger offered the prisoners better food and other privileges for their hard work. The Germans faced numerous technical difficulties in counterfeiting British and American money.

By mid-1943, the SS had contracted with the Hahnemuhle paper factory in Braunschweig in northern Germany to make the special rag needed to replicate British money. The Germans used ink produced by two companies in Berlin. Wartime shortages, coupled with imperfections, limited the production of British currency. The Germans reportedly printed some 134 million pounds sterling in less than two years, yet Stein estimated that only 10 percent of it could be considered usable. Efforts to reproduce American currency proved less successful, despite the work of Solly Smolianoff, an experienced criminal forger whom Kruger added to his collection of skilled workers at Sachsenhausern. In addition to British and American currency, the SS crafted a wide array of forged civilian and military identity cards, passports, marriage and birth certificates, stamps, and other official documents. Reichsfuhrer Heinrith Himmler reportedly planned to use these forged documents and money to create havoc among the Allies as well as to underwrite Nazi agents throughout the world. Himmler, for example, wanted to drop the imperfect British pounds on the United Kingdom by airplane.

These notes were good enough to fool anyone but an expert,” a postwar report noted. “Therefore, if a large quantity was dumped and the English government declared them counterfeit, many would say the government was merely trying to avoid redeeming them.” The rapid advance of the Soviet army in early 1945 necessitated the evacuation of the Jewish counterfeiters from Sachsenhausen and their transfer to Mauthausen concentration camp in Austria. In mid-April, the Germans again moved the prisoners and machinery to an unused brewery at Redl-Zipf where they hoped to start up production in an underground factory in the mountains. The Nazis had little time to resume counterfeiting before the war came to an end. By the last week of April, the Germans had ordered the inmates to destroy as much of the machinery and the money, and as many of the records as possible. In one of the last desperate acts of World War II, the SS dumped crates full of counterfeit money into nearby Lake Toplitz. They then moved the inmates to Ebensee concentration camp. The US Army’s liberation of the camp on 6 May prevented the Germans from killing the inmates. Once freed, Operation Bernhard’s workers quickly scattered.

Fears of “The Nazi Redoubt” In 1945, the US Army and the Office of Strategic Services (OSS) raced to investigate rumors of a Nazi counterfeiting operation, fearful that such resources might be used to finance an underground Nazi resistance movement. Worries about a last ditch Nazi stand in the Alps had mounted appreciably over the final year of the war. Even as German forces melted and Allied armies swarmed through the shell of the Thousand Year Reich in the spring of 1945, Gen. Dwight Eisenhower noted that “If the German was permitted to establish [a] Redoubt, he might possibly force us to engage in a long, drawn-out guerrilla type of warfare, or a costly siege.” As the noose tightened around the Third Reich, the OSS began to glean bits of information about an intricate German plot to manipulate currencies. In March 1945, the OSS in Bern learned that the former chauffeur of the Hungarian ambassador to Switzerland had come across a “Herr Schwendt” while traveling through Merano, northern Italy.

This “Schwendt” had urged the Hungarian to get a job in the American or British legations in Switzerland and provide information to the Germans in return for dollars and pounds to sell on the Swiss black market. Instead, the chauffeur contacted the OSS. He said that “Schwendt” lived at Schloss Labers on the outskirts of Merano and that his castle had a radio station and extensive telephone installations. He also reported that he happened to see that “cases full of brand new Italian Lire were being unpacked.” The OSS reported Schloss Labers as a bombing target. In April, a German deserter told the OSS in Switzerland that Himmler had formed “Sonderkommando Schwendt” as an independent unit “to purchase abroad a variety of objects including gold, diamonds, securities, as well as certain raw materials and finished products.” Two weeks after VE-Day in May, the OSS intercepted a letter in Switzerland from what appeared to be a German civilian who had been involved in obtaining the right paper stock for the printing of British currency. The letter-writer provided an account of the beginnings of the operation, the firms involved, and the names of several SS officers who had supervised the production.

The author had even visited the production facility and met the Jewish inmates. Military Investigation In early May 1945, US Army Capt. George J. McNally, Jr., received word that US troops in Bavaria had located a factory stocked with boxes of counterfeit British pounds. McNally was assigned to the Currency Section of the G-5 Division’s Financial Branch at Supreme Headquarters Allied Expeditionary Force, in newly captured Frankfurt. A former Secret Service agent who had specialized in counterfeiting cases before the war, he soon found his peacetime skills in demand in occupied Europe. McNally heard that American soldiers and Austrian civilians were busily fishing out millions of dollars worth of British money found floating in the Enns River. Meanwhile, a German army captain in Austria had surrendered a truck with 23 boxes of British money, valued at 21 million pounds sterling. McNally spent the next eight months untangling the twisted webs of Operation Bernhard that extended into Austria, Czechoslovakia, Germany, and Luxembourg, seeking to uncover how the Germans had compromised the security of the monetary systems of the Allies. In late May, McNally began coordinating his investigation into German currency operations with the British.

From intelligence sources in the Middle East, the British already knew that the Germans had been busily undermining their currency. At a meeting with British officials in Frankfurt in early June 1945, McNally met P.J. Reeves, the manager of the St. Luke’s Printing Works in London (the British equivalent to the US Bureau of Printing and Engraving). Reeves was visibly perturbed when he saw the amount of British currency that McNally had recovered in Austria. “He began going from box to box, rifling the notes through his fingers. Finally he stopped and stared silently into space. Then for several seconds,” McNally later recalled, “he cursed, slowly and methodically in a cultured English voice, but with vehemence. ‘Sorry,’ he said at last. ‘But the people who made this stuff have cost us so much.’” Indeed, the Bank of England had to recall all of its five-pound notes and exchange them for new ones. Get The Beast In Your Inbox! Daily DigestStart and finish your day with the top stories from The Daily Beast. Cheat SheetA speedy, smart summary of all the news you need to know (and nothing you don't).

By clicking "Subscribe," you agree to have read the Terms of Use and Privacy Policy Subscribe Thank You! You are now subscribed to the Daily Digest and Cheat Sheet. We will not share your email with anyone for any reason McNally, joined by Chief Inspector William Rudkin, Inspector Reginald Minter, and Detective Sgt. Frederick Chadbourn from Scotland Yard, and Capt. S.G. Michel, a French army liaison officer attached to the Americans, focused on interviewing Germans involved in planning Operation Bernhard and the concentration camp inmates who produced the fake money. Throughout the summer and fall of 1945, they crisscrossed Europe to interrogate witnesses, including Obersturmbannfuhrer Josef Spacil, Kruger’s commanding officer at Sachsenhausen. McNally also tried to raise the crates of money that the Germans had reportedly dumped into Lake Toplitz, but a special team of US Navy divers found nothing. Drawing on support from the US Army’s Counter Intelligence Corps (CIC), the OSS, and the US Navy, McNally wrapped up his investigation by early 1946 and completed an extensive report on the history of Operation Bernhard and the known disposition of the false currency.

“Thus,” he wrote, “in disorganization, flight and destruction, ended the most elaborate and far reaching scheme that an invading army ever devised for the wholesale counterfeiting of the money and credentials of other countries.”” The US military returned the counterfeit British currency to the Bank of England and closed its file on Operation Bernhard. Only small amounts of forged American money were ever found. As far as the American military was concerned, Nazi Germany’s counterfeiting activity became a curious footnote in the annals of the war. OSS Seeks the Kingpins As the war closed, the OSS, too, set out to locate members of Operation Bernhard who could pinpoint hidden Nazi wealth before it could be used to finance underground resistance efforts. Working at the same time as, and on occasion in coordination with, the McNally team, OSS/X-2 (counterintelligence) already had several hot leads by mid-May 1945. 1st Lt. Alex Moore, an OSS officer assigned to the Sixth Army Group’s Special Counter Intelligence (SCI) detachment, was the first OSS officer assigned to the counterfeiting case.

He took Karl Friedmann, a captured SS officer and member of Operation Bernhard, to Rosenheim near Munich to pick up George Spitz, a 52-year old Austrian Jew whom Friedmann had fingered. A prewar art dealer who had lived in the United States as a youth, Spitz was identified as one of the distributors of the counterfeit funds. Spitz admitted to Moore that he had worked for the Germans, but claimed that it was under duress because he feared arrest by the Nazis. Spitz soon provided extensive leads into the Nazi campaign to undermine the Allies’ monetary systems. He recounted to Moore how he had escaped from the Nazis and then obtained fake documents from a corrupt SS officer, Josef Dauser and his secretary, Bertha von Ehrenstein, who worked for the Nazi foreign intelligence service in Munich. Spitz claimed to have met a German named. Wendig in Munich in 1943, who asked him to travel to Belgium to purchase gold, jewelry, and pictures. Spitz made six trips and exchanged some 600,000 marks worth of counterfeit English pounds. Moore interrogated both Dauser and his secretary to check Spitz’s account.

Moore’s investigation continued to bring out new details of the Nazi counterfeiting operation. By the end of May, the OSS officer had pinpointed Friedrich Schwend (sometimes spelled Schwendt) as Operation Bernhard’s pointman for the distribution of bogus money and identified his various cover names, including Dr. Wendig and Fritz Klemp. According to OSS sources, Schwend had worked from Schloss Labers in northern Italy — the same location reported by the Hungarian chauffeur—and used couriers to sow counterfeit money throughout Europe. Although not a member of the SS, he took the rank and identity of SS Sturmbannfuhrer Dr. Wendig who had died in an Italian partisan attack in 1944. Schwend’s castle was guarded by a detail of Waffen SS soldiers and identified as Sonderstab-Generalkommando III Germanisches Panzerkorps, the Special Staff of the Headquarters of the Third German Armored Corps. Schwend apparently retained one-third of the profits derived from the sale of the counterfeit money.

He and his underlings used the fake currency to purchase luxury items on the black market as well as to buy weapons from Yugoslav partisans anxious to make money from the arms provided by the British and Americans. The Germans, in turn, sold the Allied equipment to pro-Nazi groups in the Balkans. Money distributed by Schwend also went to pay German agents abroad — Elyesa Bazna, a famous German agent in Turkey known as CICERO, was paid in false British currency produced by Operation Bernhard. Schwend’s job was not without risks. The Gestapo was on the lookout for counterfeiters and black marketers and sometimes apprehended Schwend’s men by accident. Rivalries among senior German SS officers, including Himmler, Reinhard Heydrich (first head of the RSHA), Heinz Jost (first head of RSHA’s foreign intelligence section), Ernst Kaftenbrunner (Heydrich’s successor as RSHA chief), Heinrich Mueller (head of the Gestapo), Otto Ohlendorf (head of another RSHA section), and Walter Schellenberg (Jost’s successor in the foreign intelligence section), impacted on many aspects of Operation Bernhard.

Mainstream German bureaucracies, including the Foreign Ministry and Reichsbank, vehemently opposed any tinkering with the monetary systems, even those of the enemy. As it turned out, German use of counterfeit pounds destabilized the already fragile economies of several friendly countries, Italy in particular. As the OSS pieced together the Operation Bernhard network, it made plans to apprehend those participants not already in custody. On 18 May, Spitz led Moore to Prien, where they located a large collection of trunks and crates belonging to Schwend. Schwend, however, was nowhere to be found. Spitz also helped Moore collar persons on the Allies’ wanted list not associated with Operation Bernhard, including Heinrich Hoffmann, Hitler’s personal photographer, and Loomis Taylor, the American “Lord Hee Haw,” a Nazi collaborator close to Hitler. On 10 June, the OSS reported that it had arrested Schwend and started to interrogate him to gain further details about what it called the “RSHA Financial Operation.” The Americans initially held Schwend at the Seventh Army Interrogation Center in Ludwigsburg.

Describing Schwend as a “mechanical engineer,” the Center’s records note that he “bought machinery and tools for factories.” Whether the Army listed Schwend in this category out of ignorance or for other reasons is not known. Shortly afterward OSS officers removed Schwend from the Interrogation Center and placed him in Munich’s Stadelheim prison where he remained for three weeks before he relented and spoke to his captors. Meanwhile, Moore had been transferred back to the United States and Capt. Charles Michaelis, an X-2 case officer for several OSS double agent operations in France during the war, began to handle Spitz and Schwend. Spitz impressed Michaelis as “reliable, trustworthy and intelligent… [and] willing to cooperate.” In an effort to get Schwend to talk, Michaelis took Spitz to Stadelhelm prison. Spitz “persuaded Schwend that his best chance would be to confess his activities with the RSHA and to cooperate with us.” The OSS judged that “Spitz is primarily responsible for the success of this mission.” As an initial act of good faith, Schwend agreed to turn over to the OSS all of his “hidden valuables.” Michaelis and Capt.

Eric Timm, the X-2 chief in Munich, accompanied Spitz and Schwend to a remote location in Austria in July 1945, where Schwend uncovered more than 7,000 pieces of French and Italian gold that he had buried only days before the end of the war. Michaelis reported that Schwend estimated that the gold, which weighed over 100 pounds, had a value of $200,000. Michaelis recognized that the “money constituted a possible threat to Allied security as it could have been used to finance anti-Allied activities.” With one successful mission under its belt, the OSS began to use Schwend as a “bird dog” for other hidden assets. In late July, Timm and Michaelis took Schwend and Spitz to Merano to visit Schwend’s former headquarters. The Army’s Counter Intelligence Corps had already rounded up several of Schwend’s employees who had remained in Merano, but CIC reported that the detainees did not have a clear picture of the overall counterfeiting operation.

Nonetheless, after, further interrogation of one of Schwend’s staff still in Merano, the OSS was able to recover nearly $200,000 worth of gold, American currency, and diamond rings. By then, both Spitz and Schwend had clearly demonstrated their value to OSS. According to Michaelis, Schwend added to his laurels by writing a history of Operation Bernhard. Shifting Gears As tensions mounted between East and West during the early Cold War, American intelligence began to use several former members of Operation Bernhard as agents to collect information extending beyond their wartime activities.

In August 1945, Timm reported that “it has been for sometime apparent that a well-balanced network of counter-intelligence and counter-espionage agents must include persons from all spheres of activity.” Timm observed that “the implementation of the penetration agent program wherein the use of former GIS [German Intelligence Service] personalities is contemplated remains of critical importance.” With an eye to a resurgent Nazi party, the Munich X-2 chief commented, “such persons are of importance because they are in a position to recognize other GIS personalities and are logical contacts for any illegal resistance group.” To target the resurgent Nazi movement, X-2 recruited some 13 agents in Munich and had another dozen under consideration. Spitz and Schwend were among Timm’s stable of assets. Schwend, in turn, brought other Operation Bernhard associates on board, including George Srb, a Czech, and Guenther Wischmann, his “salesman” in Slovenia. Wischmann had been arrested in June 1945, but Michaelis was able to obtain his release from prison. Timm used Spitz, codenamed TARBABY, in a variety of ways, although initially he was not tasked as a regular agent.

In September 1945, Spitz supported an OSS effort to enlist released business and banking leaders to provide information on the financial aspects of illegal Nazi activities within postwar Germany. Timm felt that Spitz had “an encyclopedic knowledge of all figures of any importance in industry and economics throughout Europe.” The Munich X-2 chief recorded in late October 1945 that “TARBABY will prepare and submit regular semi-monthly reports on financial and economic matters, as well as other items of interest which he can obtain.” In this capacity, Spitz provided information on the German Red Cross and the Bavarian Separatist Movement in southern Germany. By November 1945, Michaelis and Timm had been reassigned, leaving Sgt. Boleslav Holtsman as X-2’s lone representative in the Bavarian capital. Holtsman used Schwend to obtain a variety of reports on persons who “might be used by the American intelligence in some way.” Additionally, Schwend told Holtsman about the organization and structure of the Czech intelligence service and the exploitation of Jewish refugees by the Soviets.

Holtsman was impressed with Schwend’s work in Munich and commented, “His knowledge of personalities and underground groups in Italy, Yugoslavia, and in Germany is very wide.” Perhaps reflective of his ability to get information, X-2 gave Schwend the codename FLUSH. Balancing Ends and Means Given their wartime affiliations and postwar opportunism, none of X-2’s assets had clean backgrounds. In the ruins of Europe, the agents’ access to sources and the pressing need for intelligence outweighed concerns about their tainted reputations. Nonetheless, files continued to fill with damaging information as postwar debriefings proceeded. Walter Schellenberg, RSHA’s foreign intelligence chief, was among those who surrendered in 1945. Transferred to Great Britain for interrogation, he offered the Allies a window into German operations from the highest vantage point.

Schellenberg told his captors about the intrigues that had riddled the intelligence and security organs of the Third Reich and filled in the gaps about Operation Bernhard, He claimed to have grown incensed at the latitude that Schwend enjoyed in dispensing false British currency and described him as “one of the greatest crooks and imposters.” Because Schwend marketed some of the false money in territories controlled by the Germans, Schellenberg said that the Reichsbank itself ended up buying some of the counterfeit currency. Neither Schwend nor Spitz maintained a low profile in the ruins of Munich and they soon attracted attention. Spitz became a well-known figure in early postwar society circles. As X-2’s sole representative in Munich for most of the period between 1945 and 1947, Holtsman needed to maintain good relations with local officials. According to a 1947 report, he found Spitz’s parties to be an excellent way to meet the senior Americans in charge of the city’s military government. In turn, Holtsman assisted Spitz in obtaining a vehicle and supplies. Since Holtsman did not receive much guidance or support, he had to scrounge for supplies and ran his own operations.

It did not take long, however, for Spitz’s past to catch up with him. The Dutch representative at Munich’s Central Collecting Point — which handled art recovered from the Nazis—listed several pieces of art and rugs that Spitz had sold to Schwend during the war. In November 1946, Edwin Rae, the chief of the Monuments, Fine Arts, and Archives Section of the military government in Bavaria requested that US authorities in Italy assist in tracking down looted Dutch art in that country, to include a search of Schwend’s last-known location in northern Italy. In October 1947, H.J. Stach, another Dutch investigator, questioned Spitz at his house in Munich about his activities in Holland during the war. According to Stach, Spitz “became furious” and demanded to know why he was being sought after, when he was a Jew who had been in the “underground.” Spitz produced a September 1945 letter of reference from X-2’s Capt. Timm and also told the investigator to check with Holtsman. Stach, however, continued to distrust Spitz and commented, “It is of great importance that this case should be handled very carefully.

Spitz is one of the greatest swindlers.” In January 1948, Spitz again fell under suspicion for his role in the looting of art in Europe during the war. Then, a year later, he drew high-level attention because of allegations that he worked in the Munich black market with August Lenz, a banker and former OSS agent. Finally, in the spring of 1947, Holtsman dropped Spitz as an agent, terming him a security risk. Two years later, the CIA tersely summed up the reasons in a cable: “[Spitz’s] activities Holland and Belgium during war never satisfactorily clarified… Services both Spitz and Lenz minimal and reports praising their services need grain of salt. Both believed [to be] opportunists who made most [of] connections with American officials to further personal positions, which [were] quite precarious [in] early clays [of] occupation since it [was] known that Spitz particularly had served as agent for SD [foreign intelligence service] and possibly Gestapo.” Schwend also attracted scrutiny.

In February 1947, the Central Intelligence Group in Rome reported that US military counterintelligence personnel and the Italian, police had raided a number of buildings in Merano in 1946, including Schwend’s old headquarters at Schloss Labers. The raid netted large quantities of counterfeit pound notes, which led the Americans to believe that the Germans had a plant still producing counterfeit dollars and pounds as well as US military occupation script In 1947, Schwend’s situation became more precarious when it was discovered that he had defrauded what appears to have been the Gehlen Organization, the nascent West German intelligence service, then under US Army sponsorship. In early 1947, Holtsman attended a party in Munich where Schwend announced that he would soon take a trip “to visit his family in Italy.” From there, he fled to South America.

He later wrote two letters to Holtsman from abroad, noting that he would “always remember the Americans for the kind treatment he received.” Using the name of Wenceslau Turi, a Yugoslavian agricultural technician, on a Red Cross passport issued in Rome, Schwend and his second wife arrived in Lima, Peru, after crossing the Bolivian border in April 1947. The new immigrants declared their intention to take up farming. In fact, Schwend went to work for Volkswagen in Lima and also served variously as an informant for several Peruvian intelligence and security services. Schwend’s past caught up with him in South America. In early 1948, Louis Glavan, who had run Schwend’s affairs in Yugoslavia during the war, denounced him in a letter to Gen. Lucius Clay, the US military governor of Germany. Schwend had described Glavan in glowing terms to US intelligence in 1946, but, clearly, the two men had had a falling out.

In Glavan’s letter to Clay—subsequently sent to the European Command’s Office of the Director for Intelligence and the CIA—he claimed that Schwend and his wife had moved to Lima using false identities and were living from proceeds derived from counterfeit RSHA funds. Furthermore, Glavan fingered Spitz as the individual who had persuaded the Americans not to investigate Schwend for his Nazi activities. After a preliminary investigation, the CIA concluded that the allegation “comes from a person who… may possibly be denouncing Schwend for personal or business reasons. Thus, the reliability of that information should not be taken at its face value until confirmed by other sources.” The Agency told the Army in January 1948 that it had no contact with Schwend and had nothing to do with his immigration to South America. Years later In the 1960s, reports of Schwend’s counterfeiting activities, drug smuggling, and arms dealings throughout Latin America attracted the attention of the CIA, the US Army, the US Secret Service, the British Intelligence Service, and the West German Federal Intelligence Service.

A West German informant in Algiers in 1966, for example, claimed to be able to provide fresh samples of bogus dollars produced by Schwend in exchange for “financial help.” The CIA directed a source in the Peruvian Investigations Police to pursue the lead. Schwend denied any current counterfeiting activity, but divulged his wartime role to the Peruvians. When pressed, he continued to deny knowing where the plates for the British counterfeit pounds from Operation Bernhard were buried, although he said he suspected that they might still be located with a cache of RSHA chief Kaltenbrunner’s papers near Lake Toplitz in Austria. In 1969, a trace done by the US Army turned up a 10-year-old report on Schwend in which the German claimed to have written “various American authorities charging that, during confinement by CIC in 1945, he was robbed of a considerable amount of money and. that much of his immediate personal property was confiscated and never returned.” Given the late date of Schwend’s allegations, the Army was unable to investigate and found nothing in its files to substantiate them.

In a bizarre epilogue to a bizarre life, the Peruvian government took Schwend into custody following the murder of a wealthy businessman in early 1972. Papers found in the victim’s possession revealed the extent to which Schwend had blackmailed Peruvian officials, traded national secrets, and broken currency laws. Although Schwend was initially released, his life began to unravel. A Peruvian court subsequently convicted him of smuggling $150,000 out of the country and he was given a two-year prison sentence. Then, in 1976, Peru deported Schwend to West Germany, where he landed in jail once again when he could not pay a $21 hotel bill. The German and Italian governments still held a warrant for Schwend’s arrest in connection with a wartime murder, but decided not to prosecute. Schwend was freed, but left homeless. He returned to Peru only to die in 1980. Weighing Operational Decisions Shortly after the war, the strategic Services Unit wrote a classified history of the OSS during World War II.

The pursuit of the Operation Bernhard counterfeiters was fresh in the minds of the compilers who hailed it as a great success story for the OSS because it recovered large sums of money and other valuables. Yet for all of the positive attributes of that financial operation, the project clearly linked American intelligence with some unscrupulous characters. Useful to the Americans in 1945 as Europe lay in ruins and the Cold War loomed, Friedrich Schwend and George Spitz were among the most prominent of the agents-of-opportunity who—for decades after the war—profited from their association with the OSS. Their cases illustrate the perennial challenge of balancing ends and means in the complex world of intelligence operations. READ THIS LIST

Question: During World War II what was the German plan to flood Britain with forged currency called?
Answer: Operation Bernhard